Costs and fees
What a mortgage actually costs, beyond the rate
The headline rate is only part of the picture. Fees can turn the cheapest-looking deal into the dearest one, especially on smaller loans. Here is every cost you are likely to meet, what it typically comes to, and how to compare two deals properly.
The fees, one by one
Typical UK ranges. Your adviser confirms the exact figures for the deals you qualify for.
Arrangement / product fee
Typically £0 – £1,500
Charged by the lender for the deal itself. Can usually be added to the loan, but you then pay interest on it.
Valuation fee
Typically £0 – £500
The lender's check that the property is worth what you are borrowing against. Often free on remortgages.
Legal / conveyancing
Typically £300 – £1,500
The solicitor's work. Many remortgage deals include free basic legal work as an incentive.
Early repayment charge
Typically 1% – 5% of balance
Payable if you leave a fixed or discounted deal before it ends. Sometimes still worth paying to switch.
Low rate and big fee, or higher rate and no fee?
Take a £150,000 mortgage over a two-year fixed period. A rate 0.25% lower saves roughly £375 of interest a year, so about £750 over the two years. If that deal carries a £999 fee and the alternative is fee-free, the "cheaper" rate leaves you worse off. On a £400,000 mortgage the same 0.25% saves around £2,000 over two years and the fee is easily worth paying. Loan size is what decides it — which is why we compare the total cost over the deal period, not the rate on its own.
Fee questions, answered
The cost questions we get asked most.
- What fees do you pay on a mortgage?
- The usual ones are an arrangement (or product) fee of £0 to about £1,500, a valuation fee of £0 to around £500, legal or conveyancing costs of roughly £300 to £1,500, and sometimes a broker fee. If you are leaving a deal early there may also be an early repayment charge, and buyers may owe stamp duty.
- Is a lower rate with a big arrangement fee actually cheaper?
- It depends on the size of the loan. On a large balance the interest saving usually outweighs the fee; on a smaller balance it often does not. As a rough test, work out the interest saved over the fixed period and compare it with the fee — that comparison is exactly what we do for you.
- Can I add the arrangement fee to the mortgage?
- Usually yes, and it avoids paying it up front. Remember you then pay interest on it for the rest of the term, so a £999 fee added to a 25-year mortgage costs considerably more than £999 overall.
- Do you charge a broker fee?
- We tell you at the outset exactly what, if anything, you would pay and what we are paid by the lender, before you commit to anything. The initial comparison and callback are always free and carry no obligation.
- What is an early repayment charge and can I avoid it?
- It is a penalty for leaving a fixed or discounted deal early, typically 1% to 5% of the balance and usually reducing each year. You can avoid it by timing your switch for when the deal ends, and most lenders also allow overpayments of up to 10% of the balance each year charge-free.
- What does a valuation cost?
- Many lenders now pay for a basic valuation on remortgages and standard purchases. Where it is charged, expect roughly £200 to £500 depending on the property value. A fuller homebuyer report or building survey is separate and typically £400 to £1,000 plus.
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